The present invention relates to data processing by digital computer, and more particularly to multiple client/user and capital market funded participating interest in qualifying trust.
There are a variety of forms of collateral that are used to credit enhance or secure obligations under various agreements.
United States (U.S.) insurance companies and reinsurance companies rely on off-shore reinsurance carriers as an important source of capital. Under U.S. state insurance regulations, non-US domiciled reinsurance companies (including captives of corporations that self-insure workers compensation coverage for workers) are classified as non-admitted carriers for U.S. insurance regulatory purposes. In order for reinsurance purchased from non-admitted carriers to provide U.S. cedants with reserve credit or surplus relief, U.S. state regulations require non-admitted carriers to post qualifying collateral.
Qualifying collateral may include, for example, cash, securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners (NAIC) and qualifying as admitted assets (e.g., the qualifying assets) that are placed in a qualifying trust, Letters of Credit (LOCs) that are either issued or confirmed by banks domiciled in the U.S. or by U.S. branches of foreign banks that are approved by the NAIC, and in an acceptable form (e.g., clean, irrevocable, unconditional and “evergreen”), and any other form of security acceptable to the various state insurance commissioners.
At Lloyd's of London (“Lloyds”), members are required to maintain capital equal to a calculated percentage of approved insurance capacity. Such capital at Lloyd's, which is maintained in addition to and together with premiums received from the business written by the member at Lloyd's on a rolling 4 years-of-account basis, can take the form of cash, qualifying securities or 4-year LOCs.
In addition, large buyers of insurance and reinsurance require that their insurance and reinsurance providers be credit-enhanced to alleviate risk-based capital charges and/or individual insurance company and/or reinsurance company credit concentrations.